Mozilla seems to have the upper hand thanks to an umbrella clause

The courtroom drama is heating up between Mozilla, Yahoo Holdings and Oath. Yahoo, which is now owned by Verizon, filed a lawsuit for breach of contract against Mozilla on December 1. Yesterday, Mozilla filed a countersuit against Yahoo.

The whole dispute started with the release of the newest version of Firefox.

When Mozilla launched Firefox Quantum, it also announced that the default search engine in the United States, Canada, Hong Kong and Taiwan would be Google. Mozilla additionally changed defaults for other countries as well. Russia and other nearby territories now default to Yandex and in China, it has switched to Baidu.

Mozilla said of the change, “This is part of our ongoing search strategy, announced in 2014 to evaluate and select the best search experience in each region as opposed to having a single global default.”

Of course, Yahoo did not like this. In 2014, it had entered into a deal with Mozilla to be the default search engine for five years. Venture Beat reports that Yahoo saw its search volume grow to a five-year high shortly after signing the deal. It was a good move for the search provider — at least, it was until Verizon came along.

In 2016, Verizon entered into acquisition talks with Yahoo. In the midst of the negotiations, some fine print in the Mozilla / Yahoo contract surfaced. According to Recode, there is a clause in the agreement that states that if Yahoo is acquired by another company during the term of the contract and Mozilla does not like the new partnership, it can walk away from the 2014 agreement. Otherwise, the acquiring company would have to pay Mozilla $375 million per year through 2019 to keep the contract.

Mozilla did not feel that Verizon was a good match and decided to scrap the deal. Yahoo does not want to lose that sweet search volume it has been getting so it did the only thing it could to retain it — sue.

While the claims in Mozilla’s filing have been redacted, it is clear from Mozilla’s official statement that this umbrella clause will play a key role in the countersuit.

On December 1, Yahoo Holdings and Oath filed a legal complaint against Mozilla in Santa Clara County court claiming that we improperly terminated our agreement. On December 5, Mozilla filed a cross-complaint seeking to ensure that our rights under our contract with Yahoo are enforced.

We recently exercised our contractual right to terminate our agreement with Yahoo based on a number of factors including doing what’s best for our brand, our effort to provide quality web search, and the broader content experience for our users.

Immediately following Yahoo’s acquisition, we undertook a lengthy, multi-month process to seek assurances from Yahoo and its acquirers with respect to those factors. When it became clear that continuing to use Yahoo as our default search provider would have a negative impact on all of the above, we exercised our contractual right to terminate the agreement and entered into an agreement with another provider.

The terms of our contract are clear and our post-termination rights under our contract with Yahoo should continue to be enforced. We enter into all of our relationships with a shared goal to deliver a great user experience and further the web as an open platform. No relationship should end this way – litigation doesn’t further any goals for the ecosystem. Still, we are proud of how we conducted our business and product work throughout the relationship, how we handled the termination of the agreement, and we are confident in our legal positions.

We remain focused on the recent launch of Firefox Quantum and our commitment to protecting the internet as a global public resource, especially at a time when user rights like net neutrality and privacy are under attack.

Denelle Dixon, Mozilla’s chief business and legal officer, stated that while much of the countersuit is confidential, they would be creating “a wiki page with links to relevant public court documents — over time we expect to add more content as it becomes public.”

Mozilla looks to be in a very firm legal position here and has already demanded that Oath hand over $750 million to retain the contract. Future proceedings should prove interesting.